Most families who hire private household staff for the first time don't realise they're becoming an employer in the eyes of HMRC. That means PAYE, National Insurance, pension contributions, and a stack of legal obligations that can catch you out if you're not prepared.
We've helped over 500 families navigate this. Here's what you actually need to know — without the jargon.
You Are the Employer
If you pay someone to work in your home — a housekeeper, nanny, chef, anyone — and you control when, where, and how they work, you're their employer. Not a client. Not a customer. An employer, with all the responsibilities that entails.
This applies whether your staff are live-in or live-out, full-time or part-time. The only real exception is if they're genuinely self-employed and invoice you for services — but HMRC looks at this very carefully, and most household roles don't qualify.
Registering as an Employer with HMRC
Before your new staff member starts, you need to register as an employer with HMRC. You can do this online, and it typically takes about five working days to get your PAYE reference number. Don't leave this until the last minute — you need the reference before you can run payroll.
You'll need to set up a payroll system. Many families use a specialist payroll provider like Nannytax, PAYE for Nannies, or their accountant. It costs between £150 and £300 a year and saves you a significant headache. We strongly recommend this rather than trying to manage it yourself.
What You'll Pay
As an employer, you're responsible for:
Gross salary — the amount you've agreed with your employee before deductions.
Employer's National Insurance — currently 13.8% on earnings above £175 per week. This is on top of the salary, not deducted from it. So if you're paying a housekeeper £35,000, your actual cost is closer to £39,500.
Workplace pension — since 2018, auto-enrolment means you must offer a qualifying pension scheme. The minimum employer contribution is 3% of qualifying earnings. You can use NEST (the government scheme) if you don't have a provider.
Holiday pay — all employees are entitled to 5.6 weeks of paid holiday per year (28 days for full-time staff, pro-rated for part-time). This includes bank holidays unless your contract states otherwise.
Statutory Sick Pay — currently £116.75 per week for up to 28 weeks if your employee is off sick for four or more consecutive days.
What You Deduct from Their Pay
From your employee's gross salary, you must deduct:
Income tax — based on their tax code, which HMRC will provide. For most employees, the personal allowance is £12,570, so they pay no tax on earnings below that threshold.
Employee's National Insurance — currently 8% on earnings between £242 and £967 per week, then 2% above that.
Student loan repayments — if applicable, based on their plan type and earnings threshold.
These deductions are sent to HMRC monthly or quarterly, along with your employer's NI contribution.
Real-Time Information (RTI)
Since 2013, HMRC requires employers to submit payroll information in real time — before or on the day you pay your staff. This is done through your payroll software as a Full Payment Submission (FPS).
Miss an RTI deadline and you'll get a penalty notice — HMRC is not forgiving about this. Honestly, unless you enjoy juggling submission dates and FPS reports, hand the whole thing to a payroll service. We've seen families try to manage it with spreadsheets and it always ends with a phone call to HMRC at 4pm on a Friday.
Employment Contracts
Every employee has the legal right to a written statement of employment terms from day one. This should cover:
- Job title and duties
- Start date and continuous employment date
- Salary and payment frequency
- Working hours and days
- Holiday entitlement
- Notice periods (minimum one week after one month of service, increasing by one week per year up to 12 weeks)
- Workplace location (or confirmation they work at your home)
- Pension arrangements
- Disciplinary and grievance procedures
For live-in staff, you should also address accommodation arrangements, whether the accommodation is tied to the role, what deductions (if any) are made for board and lodging, and what happens to the accommodation if employment ends.
Live-in Staff: The Accommodation Offset
If you provide accommodation as part of the role, HMRC allows a fixed daily offset — currently £9.99 per day or £69.93 per week. This can be deducted from wages for National Minimum Wage purposes, but only up to this limit. You cannot charge market rent and still meet minimum wage requirements.
The accommodation offset is a common area of confusion. If you're providing a room and meals, seek specific advice from your payroll provider about how to handle this correctly.
Insurance
You're legally required to have employers' liability insurance as soon as you employ someone. This covers you if an employee is injured or becomes ill because of their work. The minimum cover is £5 million, and most policies provide £10 million.
We also recommend:
- Public liability insurance
- Contents insurance that covers staff working in your home
- Motor insurance if staff drive your vehicles (they must be named on the policy or covered by an any-driver clause)
When Things Go Wrong
If you need to dismiss an employee, you must follow a fair procedure. After two years of service, employees have the right not to be unfairly dismissed, which means you need a legitimate reason and you must follow a proper process.
Even before two years, you should still follow basic fairness — not least because tribunal claims for discrimination or whistleblowing have no qualifying period.
Keep records of any performance issues, conversations, and warnings. If in doubt, take employment law advice before acting. A tribunal claim from a household employee is rare, but it's unpleasant and expensive when it happens.
Getting It Right from the Start
The families who have the smoothest employer experience are the ones who set everything up properly before their new staff member walks through the door. Register with HMRC, appoint a payroll provider, arrange insurance, and have a proper contract ready.
At Irving Scott, we can guide you through all of this as part of our placement service. We've seen every scenario — from straightforward live-out housekeepers to complex international arrangements with multiple staff across several properties. Get in touch if you'd like help getting it right.